If you’re trying to obtain insurance for your cannabis business, you’ve probably noticed it’s not as simple as one would think. On the contrary, it’s complex, confusing, and can be downright expensive. But why is it so difficult? In this post, we’ll discuss why insuring your cannabis venture is such a headache and what you can do to make the process much less complicated.

What’s the Dilemma With Cannabis Insurance?

Why is cannabis insurance so hard to get? And why is it so much more expensive than other industries?

The short answer is that cannabis is risky. Not like hazardous-to-your-health risky. We’re way past that myth. Instead, it’s financially and legally risky.
Medical cannabis is legal in 37 states, and 18 states have even legalized weed for adult recreational use. So, what’s the problem?

Here’s the issue. There’s a huge disconnect between state and federal law. Marijuana may be permitted at the state level, but at the Federal level, it remains illegal. Under the Controlled Substance Act, cannabis is still a Schedule I drug, right along with LSD and heroin.

While marijuana has gone mainstream, and serious legal consequences involving weed are getting rarer every year, they still happen. In 2021, less than 100 people in the US were sentenced to the 10-year mandatory minimum in federal prison. But for those people, cannabis is not innocuous.
So, the feds still consider cannabis businesses to be operating illegally. This means that right off the bat, those involved in the industry (owners, investors, and employees) can be prosecuted when transmitting funds back and forth. This is why many cannabis businesses are forced to deal in cash only. And it’s also why many banks and credit card merchants won’t touch them since they could face the very real risk of being shut down and prosecuted for money laundering.

What Does Insurance Have To Do With the Legality of Weed?

Everyone who does business in the cannabis industry is dealing with this ongoing legal uncertainty. But for insurers, it’s a double-whammy. Simply put, insurance companies price their products based on claims history and risks.

But cannabis is a relatively new industry that exists in a legal gray area. As a result, there is still very little historical data insurers can use to predict risk. And since the rules and regulations surrounding cannabis change all the time, the risk for insurers also changes frequently.

Consequently, insurers need to continuously monitor states and jurisdictions for changes in the rules. Unfortunately, doing so takes a great deal of time and energy. As a result, it also takes a lot of money. This means insurance for cannabis businesses is more costly than other, more established, and less risky operations.

How Can Cannabis Business Owners Get Proper Coverage?

Most insurers are accustomed to clear-cut processes for transactions involving a particular type of business. They may have plenty of experience when it comes to general commercial insurance for businesses. But when it comes to this specialty insurance, many agencies don’t have the expertise to understand the unique underwriting considerations of cannabis businesses. From grow operations to dispensaries, each marijuana business requires a custom solution.

At first glance, getting insurance for your cannabis business might seem easy enough. After all, a quick Google search will reveal any number of agents and brokers claiming to offer cannabis insurance. But in truth, there are actually very few of them who have time to specialize in cannabis. Most will have a few lines of coverage and can offer some general advice, but there’s a steep learning curve to navigate in the ever-involving weed industry.

To ensure you’re adequately covered, you need to align yourself with someone specializing in the cannabis space. True cannabis insurance professionals either specialize exclusively in cannabis or have a dedicated department just for this purpose.

How To Find a Professional Specializing in Cannabis Insurance

When shopping for cannabis insurance, asking your insurance professional some questions can help you determine their level of familiarity with the industry:

• What cannabis-specific carriers does your company represent?
• Do you belong to any cannabis trade organizations?
• What is and is not covered in your cannabis insurance policies?
• Will this coverage meet my state and local requirements?
• What types of coverage are crucial for my cannabis business?
• What are the biggest risks I face in my cannabis business?
• How will I know if I am covered if I need to file a claim?
• What are some common cannabis insurance policy exclusions to know about?
• What is the process for renewing my policy?
• Do you charge any broker or service fees?

Taking the time to ask these questions is an excellent way to reassure yourself you’re dealing with an experienced operator. And along the way, you’ll likely gain some critical insider knowledge about your industry as well. If the agent you talk to can’t answer these questions, you should consider finding someone who can.

Is There Such a Thing as Cheap Cannabis Insurance?

Inexperienced agents will claim they can secure you the right coverage at the most affordable price. You may even sign papers and leave thinking you got a great deal. But common sense will tell you that selling a cheap product is not difficult. And yes, you can save quite a bit on your coverage this way.

The problem is, it’s very unlikely—even impossible—to get a robust and bulletproof cannabis business policy on the cheap. The old adage “you get what you pay for” has never been truer than it is with cannabis insurance.

Sure, you can secure a cheap policy. But it’s almost 100 percent guaranteed to have a ton of exclusions, which means you’ll have significant gaps in your coverage. For example,
Property insurance is one of the most common types of coverage for a cannabis business. Many policies cover crops, buildings, machinery, equipment, inventory, and even loss of income. However, property insurance is notorious for having many hidden exclusions. For instance, you could have an explosion or fire and only find out later that these events are not covered in your property policy. Of course, this means you’ve spent a considerable amount of money on your premium in exchange for no coverage.

Unfortunately, this is just one of many examples where a cheap, inadequate policy may actually have no value to you at all. Without the help of an experienced cannabis insurance operator, the financial consequences can be dire.

Am I Destined To Spend a Fortune on Cannabis Insurance?

Not necessarily. Most cannabis businesses don’t have the finances to purchase every type of coverage they “should” to protect their operation. So, they will need to weigh out the pros and cons carefully. The decisions surrounding which areas you need to cover with an insurance program (and those you choose to self-insure) should not be made haphazardly. You need the help of a risk advisor who specializes in cannabis insurance. This way, you can successfully navigate those decisions and secure a policy as close to meeting your needs as possible.

At GreenCore Specialty Insurance, we’ve got products to cover cannabis ventures of every kind. We’ve been insuring cannabis business through Reliant Insurance Agency for years. And now, our team of specialists has branched out to create a new kind of insurance company just for cannabis businesses.

Our tailored policies can protect dispensaries, growers, property owners, labs, medical facilities, manufacturers, and anyone else in the cannabis sector. With years of experience in every phase of production and commerce, we’re ready to assist you in making solid and thoughtful decisions about the types of coverage you need.

Yes, cannabis insurance can be confusing. So you deserve to have all the knowledge and tools you need to make informed decisions about your insurance and risk management practices. At GreenCore, we ensure our clients understand what is covered, what is self-insured, and what risk can be eliminated through risk transfer. Reach out today!